NREI recently interviewed Horsham-Pa.-based GMAC Commercial Mortgage Corp.’s Charles Dunleavy Jr., president and COO, after the direct lending company won the No. 1 ranking in our 10th Annual Direct Lender Survey. Dunleavy reveals the driving force behind GMAC Commercial’s success in 2000, what sets the company apart from other direct lenders and what’s in store for 2001.
NREI: What factors have contributed to GMAC’s growth and success?
Dunleavy: We are focused, and we have a good team. Frankly, we have renewed a real focus on the part of our origination network. We saw Newman & Associates, one of the acquisitions that we made a couple years ago, really come into its own. The other factor is the emergence of what I call the large loan transactions syndrome. One deal last year, the Columbus Centre deal, was $1.3 billion. That was the biggest deal ever done in New York City and was GMAC’s biggest deal ever. We had a couple of other deals in the hundreds of millions. The actual number of loans went down, but the dollar volume went up. You could lose a few $10 million deals and make up for it with a $1.3 billion deal.
NREI: Why do you believe GMAC surpassed other direct lending competitors in 2000?
Dunleavy: I think the ability to make these large loans under one roof — in other words, the ability for us to say to someone if you need a billion or if you need a million, you can get it here. It didn’t take too long for us to get some feelers from other major players as soon as the word got out on Columbus Centre.
Since we started the company, one-stop shopping is clearly a consistent theme for us. We try to offer as broad an array of products and as many sources of capital to our customers as we can. We’re starting to show that it works. People can get equity, construction, interim and permanent financing. We represent not just our own conduit, but also many insurance companies, Fannie Mae, Freddie Mac and more.
NREI: Do you expect 2001 to be another banner year for the company?
Dunleavy: So far, in production we’re a little bit ahead of last year, which is encouraging. It’s a little early in the game, and it’s hard for any of us to really tell just what’s going to happen out there in the capital markets. Today, you can see the screens as well as I do. It looks like things may have settled down.
I think it’s going to be more of a challenge this year in some areas. Although, lower interest rates certainly have helped. We have seen people who had taken out interim floating-rate loans a couple years ago who are now deciding to refinance to a longer-term, fixed-rate loan because rates have come down. These rates are as low as they have been for a number of years. Because of this, we may see at this junction of the year a little more froth than we see at the end of the year, although so far, so good.
NREI: How is the commercial real estate market faring in the economic slowdown?
Dunleavy: So far, we’re very, very pleased with the performance of our commercial portfolio, and so are a lot of other people that I speak to in our industry. There’s a lot of talk in the marketplace, and a lot of people are having a pretty good first quarter. Now you’ve got the syndrome of supply and demand and people talking about an excess of supply coming in within too short of a period of time for the market to absorb. Overall, most people I speak with are pretty pleased with the way commercial real estate has performed. Certainly our delinquencies and profitable list has shown very good performance so far. One of the reasons is the capital market, in the sense that securitization brings a lot of sunlight to the commercial mortgage market that you didn’t have in the past.
Think about how a security is created. First, the lender has to underwrite the loan, and the lender’s credit committees and their lending officers have to make a decision on whether or not it’s a loan they want to make. Then, when they decide to securitize it, the rating agencies come in to look over their shoulder.
These mortgages are subjected to a tremendous amount of scrutiny before someone is going to put down a couple of million dollars in a first-loss position. They’re going to scrub these things six ways to Sunday. The end result is that you’ve got a much higher quality project in the marketplace.
Securitization is a blessing to a lot of us in the sense that it’s kept a brake on things. I hope I’m proven right. From what I can see and what I hear from my contemparies in the business, fundamentals in the commercial real estate market are holding up very well, and we hope that will continue.
NREI: What is an example of a noteworthy deal that GMAC is working on right now?
Dunleavy: The biggest one we’re involved in right now is the World Trade Center deal. We’re partnered with the Silverstein Group on that transaction. We are literally as we speak working with them, and they, in turn, are working with the Port Authority to see if they can’t be successful in acquiring those buildings. So certainly that deal would most likely be the landmark transaction of this year if we were successful. I want to caution you it’s a work in process. We don’t have it yet.
NREI: In this market of consolidation, what types of acquisitions does the company pursue?
Dunleavy: We’ve closed a few acquisitions as we’ve gotten into this year. Keystone Mortgage was a big acquisition here in the United States. They have a number of large offices, but the two largest offices are in Phoenix and Dallas. They did more than a $1 billion in production before we bought them. We think with our balance sheet, our network, along with their contacts and their expertise, it will be very beneficial.
Also this year, our subsidiary, Newman, announced the acquisition of a company called Paramount Financial Services. Among other things, Newman focuses on the affordable housing and tax-exempt bond, tax-credit area.
Also, we just closed an acquisition in France, which will strengthen our European operation and give us a presence in France as well as Brussels, Belgium and Lisbon, Portugal. So our global operation, particularly the European platform, is starting to get up to steam. I think consolidation will continue. It certainly added to the success of our company.
NREI: What are GMAC’s business strategies?
Dunleavy: Again, we’ve had a half dozen things that come to my mind in terms of strategies or philosophies that have panned out fairly well. We think of ourselves as a three-core business: mortgage services, mortgage lending and asset management. Our strategy is to take those services and implement them worldwide on a more fundamental basis. We believe in this idea of one-stop shopping, and we try to equip our people with the best tools we can in the marketplace.
We bought Newman, bought Paramount, bought a healthcare division and added a Federal Housing Administration division. Each time we do that we put in our salesman’s book of tricks another product that he can talk to a customer about. When the customer receives the message that whatever he’s going to need we can get, we’ll get our fair share of the business.
Lastly, and quite significantly, is the focus we have on technology. We spend millions and millions of dollars. We just launched our latest product called RealPoint, which essentially is the world’s best and most complete data and monitoring e-commerce base for commercial mortgage loans. We have a telephone system that, when you call, you get an answer after two rings. We have spent millions of dollars on imaging technology to image servicing agreements within 24 hours. This enables more than one person to view the documents at a time.
NREI: What are the advantages of being global?
Dunleavy: We can now use a workforce anywhere in the world. In Ireland, we have people doing servicing work for us. They’re five hours ahead of us. So when a client calls in with problem it meant that someone in the old days would have had to stay and work overnight. Now it can be forwarded to Ireland for them to work on the problem when they get into the office. When we have the capabilities through the technology, the access to a global workforce, and the economies of scale, it’s pretty hard for others who don’t have those tools. It’s a cost business. Our costs are lower. An incremental $1 billion or $2 billion in loans is relatively inexpensive compared to someone who only has a $1 billion or $2 billion shop.